The problem of merchandise return fraud, although kept as a close industry secret, is a tremendous problem. Merchandise return transactions can reach as high as fifteen to twenty percent of a retailer's total sales. Thus, for retailers having sales in the range of billions of dollars per year, return transactions can result in hundreds of millions of dollars of items being returned. Unfortunately, not all return transactions are legitimate. Therefore, even small percentages of fraudulent return transactions can result in losses to a company in the range of millions of dollars per year.
Although there are many ways that return fraud can be accomplished, one of the worst methods, from the retailer's point of view, is the case when a purported patron manufactures a merchandise receipt on his or her personal computer at home. As can be appreciated, with the growing sophistication of personal computers and associated programs, such as desktop publishing programs, merchandise receipts can be created, which are virtually identical to a legitimate merchandise receipt issued by a point of sale system at a retail outlet. Once a fraudulent merchandise receipt is created, an individual can then enter a store where the fraudulent return crime is to be committed and remove an article of merchandise that is to be fraudulently "returned" from a store shelf. The individual, armed with a fraudulent receipt and article of merchandise, can then proceed to the store's return counter and present the merchandise and the fraudulent receipt to a clerk to initiate a return transaction.
The current state of the art in the area of return fraud prevention is to ask for some form of personal identification from patrons (such as driver's licenses) who are returning merchandise items at a return counter and attempt to track those individuals who are returning items. The tracking is done by either an individual store by store basis or, perhaps, across a retail store chain.
However, to date, the art has not taught a system or method for preventing merchandise return fraud, which is store or store chain independent and which, in part, uses a positive identity verification system as the backbone of the system. The disclosed invention offers a number of advances over prior art methods of preventing merchandise return fraud, which overcome many of the limitations found in the prior art. The first, and perhaps most significant advantage of the disclosed invention, is that the return fraud prevention system incorporates the features of a positive identity verification system, which is taught in U.S. Pat. No. 5,657,389, issued Aug. 12, 1997 and U.S. patent application Ser. Nos. 08/684,677 and 08/700,815, filed on Jul. 19, 1996 and Aug. 21, 1996, respectfully, as well as Applications for U.S. Letters Patent entitled "Positive Identification Display Device and Scanner for Low Cost Collection and Display of Graphics and Text Data in a Secure Manner", Attorney Docket No. IMAGEDTA-003AX "System and Method for Remote Wireless Positive Identity Verification", Docket No. 002AX, which are both being filed near-contemporaneously herewith. All of the above identified patents and patent applications are commonly owned by the Assignee of the present application and are incorporated herein by reference. The use of a positive identification system is significant in that anytime a person presents merchandise for return, the identity of that person will first be positively verified. Thus, the system would eliminate the possibility of would-be criminals inventing or utilizing multiple identities in order to thwart the ability to accurately track merchandise return transactions by individual. A second, and again significant advantage of the disclosed invention, is that the system is completely independent of the store or store chain where the return transaction is made. Thus, the system is store-independent and allows a remote, return transaction database to be accessible by any subscriber to the system, which would allow for inter-store return transaction history records to be created, maintained and analyzed to detect fraudulent return activity patterns.